Option Bull Throws Down $140K on Yahoo! Inc. (YHOO)

Yahoo! Inc. (YHOO) could get hit with bearish analyst attention

Digital Content Group
Feb 9, 2015 at 11:38 AM
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Yahoo! Inc. (NASDAQ:YHOO) put buying has picked up -- relatively speaking -- in recent months at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the stock's 50-day put/call volume ratio of 0.30 outranks two-thirds of all other readings from the past year, hinting at a healthier-than-usual appetite for long puts over calls.

This isn't surprising, given YHOO's technical downtrend. Since hitting a 14-year high of $52.62 in mid-November, the security has retreated 18.7% to trade at $42.78.

Despite being down another 0.4% today, YHOO was the target of a massive bullish trade earlier. Specifically, one speculator seemingly bought to open a 23,382-contract block of March 55 calls for $0.06 apiece, resulting in an initial net debit of more than $140,000 (premium paid * number of contracts * 100 shares per contract). This represents the buyer's maximum potential risk, should YHOO settle below $55 at expiration on Friday, March 20. On the flip side, the trader will profit if the stock topples the breakeven mark of $55.06 (strike plus premium paid) within the option's lifetime.

Elsewhere on the sentiment front, the brokerage crowd is very bullish toward Yahoo! Inc. (NASDAQ:YHOO). Seventeen of 24 covering analysts rate the equity a "buy" or better" -- compared to seven "holds" and not a single "sell" -- while its consensus 12-month price target of $57.09 stands in territory not charted since September 2000. If YHOO sustains its downtrend, a round of downgrades and/or price-target reductions could exacerbate selling pressure.


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